Yahoo Marissa Mayer

Yahoo to cut 15% of workforce and explore “strategic alternatives”

The once-mighty tech company is looking to consolidate much of its business practices following a major loss of $4.74 billion in 2015.
February 3, 2016

After a tumultuous year that saw the shutdown of its Yahoo Screen VOD service, significant drops in revenue and a brief attempt to spin off its stake in Jack Ma’s Alibaba, Yahoo has now pledged to reduce its operating expenses by more than $400 million by the end of the year.

The pending cuts are expected to translate to a loss of about 1,600 jobs (15%) from the company’s global workforce.

Yahoo also confirmed in a media statement that it will begin exploring “strategic alternatives,” leading many tech watchers to speculate on a pending sale of the once-mighty tech company.

The company made the announcements following the release of its Q4 and year-end 2015 financial results Feb. 2. The company posted quarterly revenues of $1.27 billion (up from $1.18 billion in Q4 2014) and adjusted earnings per share of 13 cents (30 cents in Q4 2014).

More critically, the financial results showed a net loss in 2015 of $4.36 billion. Some have attributed the loss to poor strategic decisions such as the reversal of its spin off in Alibaba and overestimating the value of its blogging site Tumblr.

In a statement following the financial report, the company confirmed that it will jettison a number of operations that it no longer considers worthwhile sources of revenue in favor of what it calls its “mavens” business models (mobile, video, native and social content).

According to company, those models brought in $472 million in Q4, and are expected to grow to $1.8 billion in 2016.

“Mavens as a revenue source didn’t exist at all in 2011 and was nascent in 2012,” said CEO Marissa Mayer in a call to investors. “And if you look at our actuals, combined with our projected outlook, it follows this pattern.”

Most of Yahoo’s planned workforce reductions will take place in Q1 2016.  The company will also shut down offices in Dubai, Mexico City, Buenos Aires, Madrid and Milan.

By the end of the year, Yahoo anticipates having approximately 9,000 employees and fewer than 1,000 contractors, putting its workforce at less than half of what it was in 2012.

Going forward, the company is expected to consolidate its efforts into three major areas for growth: Tumblr, search and mail.

Yahoo will also consolidate some of its digital magazine content, shutting some brands down completely and moving the rest into four core verticals of news, sports, finance and lifestyle. Much of that digital content will be hosted on Tumblr, which Yahoo purchased in 2013 for approximately $1.1 billion. The company is also expected to invest in features to make Yahoo more engaging for creators and consumers of content, “encouraging them to do more with, and therefore spend time on, the Yahoo network.”

It will continue to operate its search products, shifting most of its resources toward mobile search products. It has also pledged to invest in Yahoo Mail by improving its speed and stability, adding features that make it easier for users to share and search for content through the mail platform.

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